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GM rice settlement: Arkansas benefits from extra $50 million

Southern rice farmers are currently weighing their options following the July 1 announcement of a $750 million settlement between Bayer and producer attorneys. The settlement seeks to end numerous lawsuits brought by long-grain rice growers following the 2006 discovery of trace amounts of unapproved, Bayer-owned GM traits in the U.S. rice supply. The late-summer 2006 USDA announcement of the discovery caused rice prices to tumble and meant the loss of U.S. rice export markets.

There are actually two GM rice settlements: one for federal court and a second known as the “Arkansas state court” settlement. The Arkansas state court settlement is under Circuit Court Judge David Henry in Stuttgart, Ark.

As reported earlier, the $750 million settlement is divided into three “pots.” The difference between the federal and state settlements has to do with the Pot Three money, set up for “other, or additional, losses.” Those losses are based on decisions made by farmers that resulted in monetary losses due to the GM rice contamination.

Such losses could have come, for example, following an Arkansas Plant Board decision to ban the planting of Clearfield 131 (CL131), often grown to combat red rice. With CL131 prohibited just weeks prior to the 2007 planting season, some farmers opted to plant a less valuable crop like soybeans. The loss of revenue from planting a rice crop can be claimed under Pot Three.

The settlement calls for $100 million being allocated for Pot Three. However, only half of that is available through the federal settlement. Significantly, the other $50 million is targeted specifically for farmers who have filed suit in Arkansas.

Will the level of punitive damages awarded to farmers in several Arkansas court cases cause others to think twice before signing up for the settlement?

“I always tell my farmer (clients) ‘you may get punitive damages but you’ll be in for a long fight (due to appeals),’ said attorney Martin Phipps, who represents rice farmers in GM cases, on Wednesday morning. Phipps, of San Antonio-based Goldman, Pennebaker & Phipps, said if cases are taken to court “you could get more (money than the settlement offers), absolutely. Could you get less? Yes.

“But I think the settlement – particularly with Pot Three allowing a farmer to present additional losses for any farming decision he made that cost money – would provide what he’d get at trial. I don’t think any person should (pass on a) settlement because they might get punitive damages. Those are rare to get anyway.”

So, Pot One and Pot Two do not have Arkansas-specific concerns?

“That is correct. … Through Pot Three, Arkansas state farmers have $50 million just for them. No one else in the country can go after that.”

What is the signup deadline for Arkansas farmers aiming at Pot Three?

“We have 150 days to gather evidence to present to Bayer in a package. It’s much like preparing for trial. You have to prove ‘hey, I suffered these losses.’

“Bayer will then have time to review” that package. “They’ll then pay it all, offer to pay only part, or dispute the claim. If they offer to pay only part of the claim, or dispute it, the farmer can either accept it or the (parties) can sit down to work it out. If that doesn’t resolve the differences, the farmer and Bayer go to binding arbitration.”

Phipps’ expectation on Pot Three “is most of the claims will be paid between January and March” of 2012.

Another point of clarification: if a landlord doesn’t participate in the settlement, under the agreement the farmer’s share will be reduced by the crop-share amount. For example, if a crop-share is 50/50 and the landlord isn’t involved in the GM rice settlement, the farmer will be docked half of every dollar, from every pot, received.

For that reason “it’s extremely important that landlords participate in the settlement,” said Phipps. “They can do that by either making their own claim or by making a claim through the farmer.”